New case on “Reasonable endeavours" wording in a force majeure clause

In RTI Ltd v MUR Shipping BV [2024] UKSC 18, the Supreme Court unanimously overturned a decision of the English Court of Appeal and found that “reasonable endeavours" wording in a force majeure clause cannot require the affected party to accept an offer of non-contractual performance by the other party in order to overcome the event or state of affairs to which the "reasonable endeavours" applied.

The facts of this case are as set out in our Alert. A few key points for derivatives lawyers:

1. As noted in that case, it is well established that a force majeure clause will generally be interpreted as applicable only if the party invoking it can show that the event or state of affairs was beyond its reasonable control and could not be avoided by the taking of reasonable steps. The Supreme Court was clear that the issue in front of them was not limited to the force majeure clause in question but was one of general application which should be addressed as a matter of principle. Similarly, the Force Majeure Event Termination Event in the 2002 ISDA Master Agreement requires that the Affected Party could not, after using all reasonable efforts, overcome the impossibility or impracticability.
2. In the context of the ISDA Master Agreement, the imposition of sanctions could, depending on the circumstances, potentially constitute an Illegality Termination Event (if, for example, a party is prohibited by sanctions-related laws from facing its counterparty) or a Force Majeure Termination Event (if, for example, the parties are not able to make payments in USD to each other).
3. If there is a Force Majeure Termination Event, the obligation to use all reasonable efforts to overcome the event would not mean that the Affected Party would have to accept payments in a non-contractual currency. Clearly the parties could negotiate to make a payment in an alternative currency but the obligation to use all reasonable efforts would not mean that the parties had to accept payments in that currency.
4. Section 8(a) of the ISDA Master Agreement permits the parties to make payments in a currency other than the contractual currency if this results in the payee, acting in good faith and using commercially reasonable procedures in converting the applicable, receiving the full amount in the contractual currency. The question is whether Section 8(a) of the ISDA Master Agreement affects this analysis. However, Section 8(a) is permissive: it allows the receiving party to accept payment in a currency other than the contractual currency and convert that payment into the contractual currency in order to be discharged; that party is not under an obligation to accept payment in a non-contractual currency and convert that payment into the contractual currency. 
5. If the parties contemplate a scenario where settlement in USD may not be possible, the parties should expressly provide for an alternative settlement currency or Termination Currency.